Obama seeks executive ways to limit tax inversions

By Julie Hirschfeld Davis, new york times

August 5, 2014

WASHINGTON - The Obama administration is weighing plans to circumvent Congress and act on its own to curtail tax benefits for U.S. companies that relocate overseas to lower their tax bills, seeking to stanch a recent wave of so-called corporate inversions, Treasury Secretary Jacob Lew said Tuesday.

Treasury Department officials are rushing to assemble an array of options that would essentially wipe out the economic incentive for the deals, Lew said. Options are still being developed and no final decision has been made on whether to go forward with administrative action.

The action comes in the face of a recent increase in U.S. companies reaching deals to reorganize overseas, creating an explosive political issue that Obama has called a lack of "economic patriotism." Investment banks have been counseling companies to pursue such transactions because of the potential tax benefits.

"Time is of the essence," Lew said. "We are looking at a very long list of possible ways to address the issue."

It would be the latest move by the Obama administration to use its authority to act where Congress will not, which Republicans have criticized as an illegal overreach of power on other matters. A provision in the president's budget would have effectively banned inversions, and Democratic lawmakers have introduced legislation to halt or suspend them. Still, while some Republicans say they want to address the issue, there has been little bipartisan agreement on how to do so. While Lew said legislation was the "best solution" to addressing the issue, the recent flood of inversions has persuaded President Barack Obama's team that a quicker response may be necessary. A Bloomberg analysis estimated American companies are parking as much as $2 trillion in cash overseas.

"If Congress doesn't act, we can't wait for months or years to go by and just watch companies make decisions as if nothing will change," Lew said. Josh Earnest, the White House press secretary, told reporters Tuesday that Congress should "take action on this quickly," sidestepping questions on whether the administration would act unilaterally if Congress did not.

Lew's statements are designed to prompt companies that might be considering inversions for tax purposes to reconsider.

"My goal is actually to change what's happening out there," Lew said. "Putting companies on notice is, I think, part of it."

On Tuesday morning, a group of Democratic senators called on Obama to act on his own authority.

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"The coming flood of corporate inversions justifies immediate executive action," they said in a letter, spearheaded by Sen. Richard J. Durbin of Illinois, the No. 2 Democrat, and signed by Elizabeth Warren of Massachusetts and Jack Reed of Rhode Island.

The Associated Press reported that a spokesman for House Speaker John Boehner, R-Ohio, urged Obama on Tuesday to work with Congress on adding inversions rather than acting on his own, while the U.S. Chamber of Commerce warned that Obama's actions could potentially make the situation worse.